After Trump’s comments, now what?

WHAT’S NEXT? Yes, it’s time to take another step back, and ask “what does it mean for tax reform?”

We know President-elect Donald Trump is skeptical of the House GOP’s tax reform plan, but not a full-blown opponent, following his interview with The Wall Street Journal. As Pro Tax’s Brian Faler reports, those statements came after House Speaker Paul Ryan (R-Wis.) and his staff battled with Team Trump over the incoming administration’s concerns that border adjustability is too dense of a topic to sell to voters, especially compared to old-fashioned tariffs. The comments also could help fortify the border adjustment doubters among House Republicans, who have largely stayed silent so far, and the Senate Republicans who have basically shrugged when asked about the House framework.

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Yet, while Trump’s comments appear to increase the degree of difficulty for tax reform, you can probably assume there will still be a few more twists and turns along the way. To start with, Ryan, Ways and Means Chairman Kevin Brady (R-Texas) and other supporters of the House tax plan don’t sound prepared to defer to a President Trump, at least as of yet. Possible reasons for that: Trump significantly revised his tax plan a couple times during the campaign, shifting toward the House plan in the process, and even considered a border adjustment plank himself. (That last nugget courtesy of Steve Moore of the Heritage Foundation, a Trump adviser.

Related: Sen. Roy Blunt (R-Mo.) to the Associated Press on Trump throwing them for a loop on both tax reform and Obamacare: “I'm not concerned on those occasions where the president-elect appears to be thinking out loud.”

NEW NORMAL: Still, there certainly seems to be some pretty strong evidence now that Trump won’t just defer to the congressional GOP on policy details, as many Republicans on and off the Hill had hoped. On top of that, Trump’s decision to brush aside border adjustments might be his most surprising opinion on policy so far, as Rachael Bade reports. But though it complicates tax reform efforts, members of Trump’s team — like Wilbur Ross, his Commerce secretary nominee, and Peter Navarro, head of his new trade council — pretty firmly believe that tariffs need to be in the discussion, while there’s also the concern that taxing imports and exempting exports would hit consumers in the pocket. (Economists argue that currency adjustments would keep that from happening.)

WHAT’S HAPPENING IN THE SENATE? As we noted, the Senate’s been pretty quiet on tax reform so far. But Republicans on the Finance Committee did meet for an hour Tuesday with Gary Cohn, Trump’s choice to head the National Economic Council, to discuss tax reform and other issues, according to a Senate aide.

HEY, WEDNESDAY. John Tyler, the 10th president of the United States and a graduate of the College of William and Mary, died 155 years ago today — not even one year after the first shots of the Civil War. (That’s all a set up to point out that John Tyler, born in 1790, still has living grandsons.)

ALMOST MNUCHIN TIME: Democrats sure are getting revved up for Thursday’s Finance Committee confirmation hearing for Steven Mnuchin, Trump’s choice for Treasury secretary. Sen. Elizabeth Warren (D-Mass.) and others are hosting people foreclosed upon by OneWest, the bank Mnuchin once led, in the Capitol today, as Zach Warmbrodt of the Financial Services team reports. It’s likely to be a preview for Thursday’s hearing, which Bloomberg reports “will provide Democrats with an opportunity to puncture Trump’s populist appeal by drawing out how Mnuchin profited from the housing crisis.”

What else might give Democrats that opportunity? There’s also Dune Capital Partners, a Mnuchin firm that his disclosure form said was organized in the Caribbean island of Anguilla while the work was primarily done in New York. Expect to hear the case that Mnuchin’s arrangement looks even more galling given because of all of Trump’s talk on the stump about how the American economy is rigged, not to mention that President Barack Obama tried to squash some of those tax maneuvers. Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee, declined to comment specifically on the Anguilla issue on Tuesday, but did say: “I’m concerned as I look at this administration, when you look at their backgrounds, first thing that you bump up against is the question of: what are they going to do to put government on the side of people who got hammered over the last few years and haven’t seen any economic recovery?”

ON SECOND THOUGHT: The IRS has decided against following through on a proposal that would extend the taxable time period that happens after a corporations spins off into a Real Estate Investment Trust or Regulated Investment Company, Pro Tax’s Katy O’Donnell reports. The agency’s proposed rules in June would have doubled the amount of time that gains from the sale of assets after a spin off could be hit by the corporate tax, from five to 10 years. But in the end, the executive branch listened to lawmakers who said the regulations flew in the face of congressional intent.

HOW FULL IS THE CHOPPING BLOCK? Trump’s election and full GOP control in Congress certainly seemed to put the Obama administration’s Section 385 regulations in the crosshairs. But over at Tax Analysts, Mindy Herzfeld writes there’s only a “medium-low” chance that the rules finalized in October get repealed, maintaining that “Trump might prefer to claim credit for lowering corporate tax rates instead of supporting loopholes that enable businesses to achieve lower rates by careful planning.” (The rules, Herzfeld adds, could be part of a broader congressional pushback against regulations.) In fact, Tax Analysts doesn’t believe any of the recent international rules from Treasury and the IRS are at all that much risk.

IT STARTS: The RATE Coalition, one of several coalitions that have been working on tax reform for awhile, is kicking off a new social media campaign — with the tagline “Real Tax Reform Starts With the Rate.”

BIPARTISAN TAX LEGISLATION! Reps. Lynn Jenkins (R-Kan.) and Ron Kind (D-Wis.), tax writers both, rolled out legislation Tuesday to tweak both the 529 college accounts and the ABLE Act, which allows people with disabilities to get tax-advantaged savings accounts. The measure would give employers tax incentives to contribute to 529 and ABLE accounts and removes some of the penalties for using 529 funds. (Recall now that it’s been almost two years since the Obama administration had to pull back on a budget proposal to clamp down on 529 accounts.)

INTERNATIONAL UPDATE

HOW DO YOU AVOID A JUNK RATING? For the Philippines, the answer might be tax increases. Carlos Dominguez, the Philippine finance secretary, told Bloomberg that he thinks he’ll strike an agreement on taxes with the country’s lawmakers this quarter, which he said would keep its credit rating from sinking even further. Dominguez’s most recent plan would raise about an extra $3.3 billion in revenue for the country, after lawmakers rebelled against an earlier proposal that raised taxes on gas and cars.

STATE NEWS

FAST TRACK? A federal district court judge ruled Tuesday that a lawsuit over South Dakota’s law forcing out-of-state retailers to collect sales tax should be heard in state court, the Argus Leader reports. Retailers and state officials had hoped for that outcome, believing it could get the case more quickly to the U.S. Supreme Court, which they hope would overturn its precedent barring states from forcing collection from out-of-state merchants. Deborah White of the Retail Industry Leaders Association said Judge Roberto Lange’s decision removed “an unnecessary jurisdictional burden.” Lawyers for the companies in the suit — Newegg, Overstock and Wayfair — said the case belonged in federal courts, because it dealt with the Constitution’s Commerce Clause and Supreme Court precedent.

NETFLIX TAX GOES NEW ENGLAND: Gov. Paul LePage of Maine is looking to expand the state’s sales tax to include streaming services like Netflix, Hulu, and the Apple and Amazon music subscriptions, according to the Bangor Daily News. The GOP governor’s budget would tax those items at 6 percent, while also requiring Airbnb to collect tax on rentals in Maine.

About The Author

Bernie Becker is a tax reporter for POLITICO Pro, where he is primarily responsible for writing the Morning Tax tipsheet.

He previously covered taxes for The Hill, and was an editorial assistant for The New York Times in Washington.

A native of Martinsville, Va., Becker has degrees from the College of William and Mary and the University of Maryland. He now lives in Northwest D.C. with his wife and young daughter. His hobbies include running, reading history books, eating spicy food and watching his daughter chase his cat.